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Quarterly report – Q3 2021 – International natural gas prices

In a context of an unprecedented tightness on the global gas market, European and Asian spot prices continued their dizzying ascent in the third quarter of 2021. The historic surge became more pronounced as the year progressed and the market tightened.

In Europe, low gas inventories, reduction of both regional production and pipeline imports (from Russia and Norway) as well as record-high carbon prices have propelled the TTF price, which provided a price floor for north-east Asian LNG.

In September, international spot prices went stratospheric, spurred by fresh European concerns over Russia’s ability to increase pipeline exports and continued competition for spare LNG cargoes from Asia and South America.

Spot prices also spiked in Asia. The Asian bull run was mainly driven by gains on the Dutch TTF hub. At the regional level, LNG demand outpaced LNG supply, which underperformed due to a series of unexpected outages.

In a context of post-Covid economic recovery and an induced rebound of the prices of all energy commodities, the second quarter 2021 saw an unprecedented and steady rally of international spot prices, driven by growing European and Asian gas demand.

In Europe, low gas inventories, an unseasonable and persistent cold weather as well as the highest recorded carbon prices have propelled the TTF price, which provided a strong upside to Asian spot prices.

During the second quarter, Asian spot prices rose even faster than European spot prices because of surging Chinese LNG demand, rising oil prices and LNG supply outages. This results in a growing price premium to the European price. During the second half of June, Northeast Asian spot LNG prices have jumped by $2 to $13/MBtu at the end of the month, more than $10/MMBtu higher than they were this time last year and their highest levels since 2014 for the same summer period.

Low storage inventories, combined with robust winter demand in both Asia and Europe kept spot prices relatively high in the first quarter 2021.

In the first half of January, Asian and European spot prices spiked to all-time highs as extremely cold weather coincided with tight supply. The Northeast Asian spot price peaked at $30/MBtu by mid-January, opening the widest premiums on record.

European and Asian spot prices retreated in the second half of January as buying focus shifted to the March and April shoulder months. Moreover, temperatures had warmed and nuclear availability improved in Japan, while supplies were creeping up in Asia.